All posts tagged Fortescue Metals

Fortescue Metals Group Ltd. could be looking at a US$4 billion payday if it moves ahead with plans to sell a sizable chunk of its rail and port assets – a much-needed sum to help pay down its hefty debt pile.

That’s the view of CIMB mining analysts, who forecast the proposed infrastructure sales could reduce the heavily geared Australian company’s gross debt by around a third and drive a re-rating of its stock.

The mining company, founded a decade ago by billionaire Andrew “Twiggy” Forrest, is keen to offload some of its infrastructure assets. The company built a vast network of power and water infrastructure as well as railway and port facilities in Western Australia state’s remote Pilbara region as it raced to become the world’s fourth-largest iron ore producer after Vale SA, Rio Tinto PLC and BHP Billiton Ltd.

Just days after playing predator, could mid-tier miner BC Iron Ltd. be about to turn prey?

Regent Pacific, the company’s second-biggest investor with a 20% stake, this week asked its shareholders for permission to sell all or part of its interest in the Australian company over the next 12 months.

Hong Kong-based Regent Pacific likes to recycle the money it’s made from its various investments to pay for “strategic, controlling and operational interests” in mining companies and assets it reckons can add more value. It’s positioned itself for a selldown just days after BC Iron paid 190 million Australian dollars (US$200 million) to raise its stake in a Western Australian iron joint venture with Fortescue Metals Group to 75% from 50%.

Goldman Sachs and Citi analysts eying Fortescue Metals Group Ltd.’s trading halt are questioning whether the miner will need to turn to an equity raising to avoid breaching banking covenants.

Citi’s Clarke Wilkins says that if no waiver is given, Fortescue could be forced to repay US$2.1 billion facilities in the next two years or offer additional security to the debt so it ranks above the US$7.04 billion in unsecured bonds that mature between 2015 and 2022.

“On our forecasts Fortescue would need around 500 million Australian dollars (US$527 million) in an equity injection if forced to repay US$2.1 billion, assuming no further asset sales, expansion beyond 115 million tons per annum or deferral of capital expenditure,” Citi said in a note to clients. The broker also noted every 5 cent move in the Australian dollar would add around US$200 million to funding requirements.

For months, the world’s fourth largest producer of the rusty mineral has been reassuring the markets it could not only survive but push ahead with its aggressive expansion plans despite falls in the commodity’s price. Tuesday, the company was forced to backtrack.

In a statement to the markets, Fortescue cited volatile market conditions and uncertainty over the future for iron ore prices as it reined in massive spending plans in Australia’s resource-rich Pilbara region. Cutbacks will include a reduction in staff numbers and the deferral of the development of its Kings deposit, at the Solomon Hub, and its fourth berth at Herb Elliott Port, it said.

The amorphous broader market that has been steadily selling shares in the big Aussie miners for more than a year appears far from convinced the slump in iron ore–and other raw materials–will correct any time soon.

Fortescue Metals Group’s go-it-alone strategy to become one the world’s fourth-largest iron ore miner may change as it eyes the next major expansion beyond what it has dubbed T155.

In comments that will interest Beijing and Tokyo, home to the world’s biggest steelmakers, Fortescue Chief Executive Nev Power said it could bring in a strategic partner on future iron ore developments in the Pilbara region.

T155–Fortescue’s US$9 billion infrastructure push aimed at tripling its output in the Pilbara–is scheduled for completion next year. But the Perth-based company says that, as long as the iron ore market is looking healthy, it will quickly move on with new projects in a continuation of its aggressive ramp up.

BHP Billiton is a fully paid-up believer in the mining theory of ‘nearology’ if its latest Australian land grab is anything to go by.

The Anglo-Australian miner has tabled applications for exploration licenses covering more than 10,000 square kilometers in arid regions surrounding the huge Olympic Dam copper-gold–uranium mine in South Australia state.

The applications are a signal that BHP won’t sit back and watch interlopers such as Rio Tinto and Fortescue Metals Group build big land positions nearby. They also underscore how the best exploration prospects are often found close by existing discoveries, rather than bold and expensive bets on largely untapped regions overseas.

Australian iron ore billionaire Andrew ‘Twiggy’ Forrest is developing a reputation as a go-to man for smaller miners struggling for financing.

In his latest act of corporate chivalry, Mr. Forrest has agreed to back junior gold miner Apex Minerals by spending up to 17.95 million Australian dollars (US$18.4 million) on options to take a 19.9% stake in the company.

Mr. Forrest–the founder and chairman of Fortescue Metals Group–also agreed this month to offer Poseidon Nickel an A$8 million bridging loan and underwrite the company’s planned A$20 million equity raising.

Fortescue Metals Group has pushed through a US$2 billion high-yield bond offering, twice the amount it had set out to raise.

It’s a clear indication that debt is available to more than just the mining majors–despite the turmoil that has prompted some European lenders to pull back, and concern slowing growth in China will weigh on prices for metals and minerals for some time to come.

About Deal Journal Australia

Deal Journal Australia is an up-to-the-minute take on the deals and deal makers that shape the Australian landscape, including mergers and acquisitions, capital raisings, private equity and debt markets. In short, wherever money changes hands. Deal Journal Australia is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal’s Gillian Tan is the lead writer, with contributions from other Journal and Dow Jones reporters and editors. Send news items, comments and questions to gillian.tan@wsj.com.

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